Savvis president: Customers 'skeptical about private clouds'

Savvis will know when cloud computing really arrives. Why? Because Savvis' revenue breakdown will highlight how massive companies like Thomson Reuters, government agencies and large financial services firms are moving to cloud computing.

Savvis, a data center and Web hosting provider, has an interesting view of the cloud computing market. For starters, rivals like Terremark are beginning to be acquired. Meanwhile, Savvis caters to large enterprises, which have been gradually moving to the cloud.

Simply put, Savvis will know when cloud computing really arrives. Why? Because Savvis' revenue breakdown will highlight how massive companies like Thomson Reuters, government agencies and large financial services firms are moving to cloud computing.

With that backdrop, I caught up with Bill Fathers, president of Savvis, to talk cloud computing and other data center trends.

What is Savvis' cloud revenue? Fathers said that cloud revenue ranges from $8 million to $10 million a quarter, but "is growing at a heck of a clip" and growing much quicker than managed hosting. Overall, Savvis will have $1 billion in revenue this year.

What's the blend between managed hosting and cloud? Increasingly, cloud is part of the manage hosting equation for customers. Fathers said that Savvis had 3,500 customers and 350 of them now use Symphony, the company's cloud platform. Three hundred of those cloud customers also buy managed hosting. "Few applications we host can live entirely in the cloud," explained Fathers. "We have trading platforms, medical records, risk management systems and air traffic control. You can put two thirds of that in the cloud. The interface and maybe the app layer, but the database has to be managed."

How's the cloud adoption rate for large enterprises? Fathers said Savvis sees two varieties of cloud adoption. First, companies put one app in the cloud and then build out. And then there are enterprise wide cloud adoption plans. Savvis has won government contracts for the Ministry of Justice in the United Kingdom. It has also landed a contract with a unnamed large mobile handset manufacturer that aims to provide application and games to customers.

Fathers said that Savvis' customer base---typically companies with more than $1 billion in revenue a year---started dabbling with cloud computing in 2009. Last year, companies began to plot wholesale moves and now they are "adopting aggressively with some pretty radical plans." "Huge production applications are moving to the cloud very quietly," said Fathers. These customers pay Savvis by the hour or a fixed licensing fee and then a subscription fee for any overages.

What about so-called private clouds? Fathers argues that his customer base has largely given up on building cloud infrastructure themselves. "Enterprises started to build these large private clouds, but then decided to outsource or go cloud," said Fathers. "The question becomes whether cloud can be adopted enterprise-wide. Why spend $50 billion and build your own cloud? A third of our wins over the last three quarters have come from companies that had some flavor of a private cloud."

So private clouds are bunk? "Customers have a right to be skeptical about private clouds," said Fathers. "There are many shades of gray over how much is shared vs. how much is dedicated. Cisco, HP and others want you to build your own cloud, but senior executives are getting panicky. Only so many customers have the stomach to build their own cloud infrastructure. There's a lot of skepticism because you can spend a fortune."

Indeed, there's a private cloud paradox. "Wasn't the idea that enterprises can all run off the cloud and build from it?" asked Fathers. "If all enterprises want to build their own cloud it's going to be expensive. Instead of unutilized servers we'll have unutilized clouds."

Is Savvis a cloud play? Fathers acknowledged that other companies have more cloud revenue, but that's partly a reflection of the customer base. For instance, Rackspace deals with smaller companies that can go cloud earlier. Even then, most of Rackspace's revenue comes from hosting. "We deal with more serious large companies," said Fathers. "We do not wander in AWS (Amazon Web Services) or Rackspace territory. If we tackle the SMB market we'll go to market through telco providers." These telcos---Virgin Cloud, Bharti Airtel---offer cloud services to businesses built on Savvis infrastructure and orchestration tools.

What's the competitive landscape? Fathers duly noted Verizon's purchase of Terremark, but expects there to be sales challenges because large cloud deals are often riding along with consulting arrangements. Most telecoms globally will partner with Savvis not be competitors. Fathers sees systems integrators as key cloud providers going forward. Another competitive dynamic to note is that software companies such as Microsoft and Oracle will increasingly adopt the cloud.

Where is the cloud adoption? Fathers said Asia is adopting cloud computing much faster than the U.S. because there is less legacy infrastructure. Areas like Singapore and Hong Kong are adopting cloud much quicker than Tokyo. And China? "We haven't launched a business in China in our own right. The licensing laws aren't clear," said Fathers, who was upbeat on India and Brazil as cloud markets.